No Service Tax on Lottery after 1.7.2012 - HC
TAXING Lottery had been a taxing proposition for the government, not always leading to success. The lottery business in India is a big-time lottery for the organisers and ticket sellers with a turnover of over a lakh of Crores a year.
There is said to be a Lottery Mafia in operation in several States and the whole scheme is full of frauds with absolutely no control. Interestingly the small North Eastern states are the origin for many lotteries and most of the tickets are sold deep down South in Kerala. Technology has only added a new dimension to the fraud. While many states have banned lotteries, Internet knows no geographic boundaries and online lotteries are doing brisk business.
Unfortunately governments have been interested only in getting their pound of flesh by taxes, instead of curbing the menace, which is simply an organised way of looting the poor people.
Government's attempts to bring sale of lottery tickets under Service Tax net were not really successful. The Department tried to tax it under ‘business auxiliary service' from 01.07.2003, but that did not find favour with the Courts. Then they amended the Act to include an explanation to the definition of ‘business auxiliary service' , which the Supreme Court held to be valid only prospectively.
By Finance Act 2010, a new heading zzzzn was introduced which included lottery. This was also struck down by a High Court. Come 2012 and lottery fell in the negative list, but the positive officers of the Department were not prepared to accept such negative attitude of the Government and Parliament. Immediately after the negative list regime came into existence, a Superintendent issued a letter to a lottery seller that he was liable to pay Service Tax.
This letter was challenged in the High Court and the High Court has quashed it emphatically holding that transactions in lottery tickets are not liable to service tax under the provisions of the Finance Act, 1994.
The Government is sure to go to the Supreme Court.
We bring you this High Court order today.
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